Financing cash flow peaks and valleys

For many businesses, financing can drive cash flow for your business such as a continuous roller coaster.

Sales are up, then down. Margins are good, then they reduce from. Cash flow can swing back and forth like an ECG graph of a heart attack.

How do you go on financing cash flow for this type of business?

First, you need to know exactly, and manage your monthly fixed costs. Regardless of what happens in the course of the year you must be on what amount of resources, are needed from scheduled and recurring operating costs to cover, which will occur if you have a sale or not complete. Does this every month for a full twelve month cycle is the basis for cash flow decision-making.

Secondly, from where you are now, to determine the amount of funds in cash, owner of outside capital, which invested in the company and outside sources currently could be others.

Third project from your cash flow so that fixed costs, existing liabilities and receivables are realistic appeared in future weeks and months. If cash is always tight, make sure that you do your cash flow on a weekly basis. There is much variability in the course of a single month project only on a monthly basis.

Now, you have to evaluate a basis for the financing of your cash flows.

Financing cash flow clearly his, sector is to always have something for every company due to the industry, level of the company, company size, business model, owner resources and so on.

Every company must itself its funding sources to assess cash flow, including but not limited to owner investment, trade, or payable financing, government transfers payable discounts for prepayments, deposits on sale, third-party financing (line of credit, term loans, factoring, purchase order financing, inventory financing, asset based lending, or what is relevant for you).

Okay, so, now you have a cashflow stock and a thorough understanding of your options for the financing of cash flows in your specific business model.

What to do?

Now you are able to maintain his, future opportunities, that fit into your cash flow.

Three points to clarify, before we go further.

First financing remains, not necessarily on a loan from someone when your cash flow needs more money. Its a process keep your cash flow continuous positive at the lowest possible cost.

Secondly, you should only market and sell, what you can cash flow. Marketers will measure the ROI of a marketing initiative. But if you not the business to the sale to complete and collecting the proceeds cash flow, there are be measured any ROI. If you have a business with fluctuating sales and margins, you can enter only in transactions that you can finance.

Thirdly, marketing to customers, you can sell, must again and again to to maximize your marketing efforts and reduce the unpredictability of the annual sales cycle through regular repetition to focus incoming orders and sales.

Marketing works under the premise that when they provide what the customer wants the money side of the equation will take care of themselves,. In many companies, this proves to be true in fact. But in a business with fluctuating sales and margins, financing, cash flow has an other criteria be included in sales and marketing activities.

Overtime, virtually every company has the potential to smooth out the peaks and valleys through a robust marketing plan, that better lines up with the customer requirements and the business financing constraints or parameters.

Next to the link financing cash flow more to marketing and sales, builds which next to the most effective action you take, your sources of funding.

Here are some possible strategies for expanding your sources for financing cash flow.

: Strategy # 1 strategic partnerships more funding in certain situations can benefit with major suppliers, the expansion of opportunities. (This happens with larger suppliers, that 1) have the financial means to develop financing, 2) see as important customer and value your company 3) ability to manage forecast and cash flow have confidence in the business.

Strategy # 2: you sure as far as maintenance show possible that your financial accounts can a profit debt financing. You can be good accountants income tax money saving, but if they business profitability on or close to zero and tax planning drive, can also effectively destroys your ability to borrow money.

If possible, only make strategy # 3: customers with credit worthy. Credit worthy enable customers of the business and potential lenders finance receivables increase the amount of external financing available.

: Strategy # 4 processing path for your physical assets. Equipment and inventory are easier to finance, if the lender is clearly understood how to liquidate the assets in the event of default. In some cases companies can be assigned to resale option agreement on certain equipment and inventory of interested parties, will receive a lender as a remedy against a facility used for the financing of cash flow.

Strategy # 5: joint venture an opportunity with a different business to share the risk of a major distribution facilities, which may be to risky to assume to yourself.

Summary

The primary long-term goal of a company with fluctuating cash flow and edges smooth out the peaks and valleys and create a scalable business with a predictable sales process.

This is best achieved with an approach that inter alia the following steps.

Step # 1. micro manage you your fixed costs and cash flow and exactly project from the cash flow requirements of the company on a weekly basis.

Step # 2. take you have a detailed list of all sources that you use for financing cash flow.

Step # 3. integrating you your financing constraints in your marketing approach.

Step # 4. If possible, only with credit card worthy customers to reduce risk and increase financing options active.

Step # 5. work for the extension of your funding sources and source available limits for the financing of cash flow.

Economic cycle stability and cash flow predictability is an evolutionary step for any company. The industries with long sales cycles will tend to be more difficult to tame to manage due to a larger number of variables.

Continuous focus describes the process for improvements help, create the desired results in the course of time.

Brent Finlay facilitates the understanding of corporate financing. Information about you to find and financing for your company to secure. Get your free 6 part mini-course website the small business loans and financing

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